What BeepBoop Actually Does — and the Proof
The plan, in one breath: sell cash-secured puts on wonderful, dividend-growing companies to get paid for promising to buy them cheaper. If a put gets assigned, own the stock and sell covered calls against it — the ‘wheel.’ Hold for the growing dividend, roll to stay long-term for taxes, and sell only if a company cuts its dividend.
Honest expected return: ~10% a year — less in a taxable account, more in an IRA. Not the 12.7% a naive backtest flashes below. The options don’t make the number bigger; they make the ride smoother and the income something you can actually see.
23 years: the boring robot vs the S&P
We ran the core idea over 23.5 years — including the 2008 crash — premiums estimated from historical volatility. This is the gross, pre-tax picture; the honest after-tax number lands lower (that’s further down too).
| Strategy (2003 → now) | Return / yr | Worst drop |
|---|---|---|
| S&P 500 (SPY) | 11.6% | -50.8% |
| Buy & hold the basket | 11.7% | -29.3% |
| Always sell covered calls | 12.7% | -20.3% |
| Timed: cap only when yield-rich | 12.0% | -28.6% |
| Timed: keep upside during recoveries | 12.2% | -26.7% |
| Timed: no cap during market crashes | 11.5% | -28.7% |
Watch $100k grow — five ways to run the same stocks
The experiment: take $100,000, split it evenly across 66 blue-chip dividend growers at the start of 2007, and run it through 20 years — the 2008 crash and the 2020 crash included. Every dividend, every trade, and every tax bill is modeled. The only thing that changes between the lines is how you manage the same stocks.
What each line is doing:
- Buy & hold (blue) — buy once, never sell, reinvest the dividends.
- Rebalance, naive — every quarter sell winners and buy losers back to even. Taxable.
- Rebalance, tax-smart (green, our pick) — same idea, but only trim long-term lots and refill the laggards with dividend cash instead of selling.
- Valuation-timed — lean toward names that look cheap vs their own 5-yr yield history.
- + tax-loss harvest — the above, plus bank losses to shrink the tax bill.
- S&P 500 (grey) — skip all of it and just buy the index.
| How you run it | Pre-tax / yr | After-tax / yr | $100k became | Worst drop |
|---|---|---|---|---|
| Buy & hold | 11.8% | 11.4% | $827,218 | -35.9% |
| Rebalance (naive) | 12.3% | 11.1% | $791,325 | -35.1% |
| Rebalance (tax-smart) | 12.3% | 11.7% | $869,600 | -34.9% |
| Valuation-timed (PM) | 12.5% | 11.3% | $817,746 | -35.0% |
| Valuation + tax-loss harvest | 12.2% | 11.3% | $819,371 | -36.2% |
| S&P 500 (just buy the index) | 10.7% | 9.7% | $615,958 | -51.0% |
Can we beat dead cash? (leverage & collateral)
A cash-secured put leaves your collateral in cash — and without Gold, that earns 0%. What if it earned something instead — and what if we borrowed to write more puts? We modeled it on the real option-price index, straight through 2008, 2020, and 2022. Same exact put-writing — four different places to park the collateral (log scale, so you can see each one's bumps):
| Where the collateral sits | Return / yr | Worst drop | Worst month |
|---|---|---|---|
| Dead cash (0%) | 5.4% | -33.1% | -17.7% |
| T-bills | 7.0% | -32.7% | -17.7% |
| 7-10yr Treasuries | 8.9% | -28.4% | -18.5% |
| Gold | 15.1% | -41.9% | -33.8% |
After taxes, here's what you actually KEEP
Gross returns are a mirage — what matters is what you keep after the IRS. In a taxable account (32% short-term / 15% long-term rates), the same strategy, before and after tax:
| Strategy | Pre-tax / yr | After-tax / yr |
|---|---|---|
| S&P 500 (buy & hold) | 11.6% | 10.9% |
| Own the basket (buy & hold) | 11.7% | 11.0% |
| Naive: always sell calls (churn) | 12.7% | 8.7% |
| Tax-optimized: hold + roll | 12.7% | 11.4% |
The catch: in a pure bull market, it lags
Zoom into 2010 → now — a raging bull, no crash — and it flips: the S&P did 13.9% while real put-writing did just 8.0% (CBOE PutWrite Index, real option prices). No crash means the defense never pays off. Honest tradeoff: this wins by losing less, so it needs a full cycle to shine.
Why not sell cheap, far-out-of-the-money puts?
Collateral is set by the strike, not the premium — so a far-OTM put ties up nearly the same cash for way less income:
| Strike distance | Return/yr | Worst drop | Prem yield |
|---|---|---|---|
| 3% OTM | 3.0% | -15.5% | ~8.3% |
| 5% OTM | 2.0% | -13.3% | ~4.0% |
| 10% OTM | 1.0% | -7.3% | ~0.6% |
Wait — what happens when you get called away?
Fair question. Across the backtest the stock got called away 21.8% of the time (1,229 of 5,640 monthly positions) — roughly 1 in 5. When it happens you sell your shares at the strike, keep the gain up to there plus the premium, and immediately redeploy (buy back in and write the next call, or sell a put). The model assumes that redeploy is instant.
Two things it does not model, and you should know both: slippage on the rolls (small), and — the big one — taxes. Getting called away realizes a gain, and at ~22%/yr that's a lot of taxable events. This strategy is meaningfully better in a tax-sheltered account (IRA / Roth) than a taxable one — though holding long-term and rolling instead of getting assigned claws most of that drag back (see the after-tax section above). BeepBoop's account is taxable, so he leans on exactly those moves. Not hiding it.
Caveats, out loud: premiums estimated from historical vol (below real IV, so conservative); the basket is survivor-selected quality names (flatters buy & hold); 5%-cap monthly model; no taxes or slippage modeled. Ballpark truth, not a promise.